Mercury (Hg) is one of the most toxic heavy metals in soil and groundwater, and mercury methylation is the key step for invasion of Hg into the food chain. Iron sulfide nanoparticles stabilized by carboxymethyl cellulose (CMC-FeS) have demonstrated excellent sorption/immobilization for mercury in water and soil. However, information has been lacking pertaining to the effects of CMC-FeS on speciation and microbial methylation of Hg at ppb level in groundwater. This work studied Hg speciation in the presence of CMC-FeS and the inhibitive effect of CMC-FeS on the microbial methylation of Hg in groundwater. CMC-FeS (CMC-to-FeS molar ratio of 0.0004) offered unusually fast sorption rate and high Hg sorption capacity, with a maximum Langmuir sorption capacity of 3358.28 mg/g. XRD, FTIR, and XPS analyses suggested that mercury removal was attributed to surface complexation, ion exchange, and chemical precipitation, resulting in the formation of FeS-Hg complexes and HgS. Dissolved oxygen had negligible effect on mercury uptake. The simple nanoparticle treatment inhibited mercury methylation by up to 60.8% when tested with a model metal-reducing bacterium Geobacter sulfurreducens PCA. When aged for 6 months, the nanoparticles exhibited excellent physical stability and high mercury capacity, and the immobilized mercury did not show any leaching. The present study provides direct evidence that immobilization of Hg by CMC-FeS remarkably inhibits microbial methylation of Hg, and thus mitigates toxic effects of mercury in water on human and the environmental health.